U.S. food prices could rise up to 4%, USDA says

Feb 28 2011

U.S. food prices will "rise as much as 4% this year, more than the 2% to 3% estimated last month, after a surge in prices for farm goods, the U.S. Department of Agriculture" forecast Thursday during the agency's outlook conference in Washington, Bloomberg/Los Angeles Times reports (2/24).

"The cost of processing food is soaring in part because foreign demand for U.S. agricultural commodities is surging at the same time the rising price of gasoline is stimulating the biofuel industry's appetite for corn to make ethanol," the Wall Street Journal writes (Kilman/Jargon, 2/25). In response to growing demand, "U.S. farmers will plant massive corn and soybean crops this spring but it may take more than two years to rebuild razor-thin stocks and quell the global surge in grain prices," USDA officials said, Reuters reports (Abbott/Doering, 2/24).

"The increase in acreage is massive by historical standards and analysts warn that farmers will only deliver the increase under ideal weather during the planting season. And even if farmers deliver a record acreage, demand is still booming," the Financial Times reports. "The outlook for corn is particularly important because the U.S. exports around 60 percent of the world's supplies and the price of the grain, used to fatten livestock, filters quickly into the food supply chain, affecting meat and poultry prices," according to the newspaper (Meyer, 2/24).

"Global food prices rose 25% last year and set a record last month as world grain inventories were headed for a 13% decline before the next harvest, the USDA estimated. Tighter supplies and higher costs have contributed to unrest in North Africa and the Middle East as rising demand causes isolated food shortages and accelerated inflation in poor countries even as it boosts incomes for U.S. farmers," Bloomberg/LA Times adds (2/24).

At the USDA meeting, "former President Bill Clinton raised another issue in the food price debate Thursday: ethanol production. The U.S. ethanol industry uses more than a third of the nation's corn crop to make the fuel," Minnesota Public Radio (MPR) reports. "Clinton said making ethanol is a good thing but he said making too much of the product could short the rest of the world of food, and cause food riots" (Steil, 2/24).

Despite such "criticism that using food for fuel was helping to drive up prices, Agriculture Secretary Tom Vilsack told the conference the government had no intention of scaling back on ethanol," Reuters adds (2/24). According to MPR, Vilsack "also said the U.S. and other wealthy nations should work together to alleviate food problems in other parts of the world" (2/24).

The Economist Features Special Report On Feeding The World

In an article previewing a special report on feeding the world, the Economist says that "[a]n era of cheap food has come to an end," which is contributing to "growing concern" about feeding a global population that is expected to reach nine billion people by 2050. The magazine reports "the fact that agriculture has experienced two big price spikes in under four years suggests that something serious is rattling the world's food chain."

The article notes how world leaders have responded to the growing demand for food, saying leaders at the 2009 G8 meeting "put food alongside the global financial crisis on their list of top priorities," and French President Nicolas Sarkozy, current president of the G20, "wants to make food the top priority." The piece also notes how the Bill & Melinda Gates Foundation and global companies gathered at the World Economic Forum this year responded to issues about growing food demand.

According to the magazine, the special report examines issues surrounding crop yields, land and water contraints, fertilizer and pesticide use, biofuel policies, intensive and organic farming techniques, the importance of technology, and the impact of recent price increases (Parker, 2/24). Articles featured in the Economist's special report are available here (2/26).